Here’s Why Pfizer Stock Can Rebound After Falling Nearly 15% From Its Peak Last Month

by Trefis Team
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[Updated: 9/16/2021] Pfizer Stock Decline

A few weeks back, we discussed that Pfizer’s (NYSE: PFE) stock price could rebound over a one-month period after falling 4% in a week, based on its historical performance. However, PFE stock has seen a decline of over 6% since then, and it is down 4% in the last five trading days. The recent decline can be attributed to rising concerns over the Biden administration’s plan to reduce healthcare costs, including negotiating the drug prices in its Medicare program. This has resulted in a sell-off in some of the large pharmaceutical stocks, including Pfizer, Merck, and Johnson & Johnson, among others.

In another recent development, the U.S. FDA stated that the booster shots of Pfizer’s Covid-19 vaccine might not be needed, even though it generates a higher immune response. The FDA’s stand stems from the fact that it is yet to be proven that the efficacy of Pfizer’s vaccine is declining. The vaccine has been found to be effective against Covid-19 so far, and a booster shot will make sense only after there are signs of declining efficacy. [1] But will PFE stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent?

As we discussed in our previous update, according to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for PFE stock average around 3% in the next one-month (twenty-one trading days) period after experiencing a 4% drop over the previous week (five trading days). Our dashboard on Pfizer stock chance of a rise offers more details.

So, going by historical performance, it is likely that PFE stock will see a rebound going forward. But if there were serious in-roads to the development around the government’s plans to negotiate drug costs, it may result in bearish sentiment for pharmaceutical companies at large. That said, it is likely that the overall process may take a long time to materialize – if it does. Back in 2018, the Trump administration also created a blueprint to lower drug prices, but it didn’t actually materialize. There are several factors that need to be addressed while trying to control drug prices – the most relevant one being that long-term patient access to drugs will be significantly impacted, given that price control will directly result in fewer new drugs being developed.

We believe that long-term investors are likely to be better off buying the recent dip in PFE stock, based on both the historical performance of the stock, as well as going by our Pfizer Valuation of $52 per share based on $4.65 adjusted EPS and a P/E multiple of 11x for the full-year 2021.

 

[Updated: 8/25/2021] PFE Stock Decline

The stock price of Pfizer (NYSE: PFE) reached an all-time high of $52 last week before a recent sell-off in Covid-19 vaccine stocks drove PFE down to its current level of around $48. PFE stock has fallen 4% over the last five days. The decline was seen in other Covid-19 vaccine stocks as well, including Moderna and Novavax. There is no announcement or development that should warrant any concern. The decline appears to be profit-booking at the higher levels. PFE stock has moved over 30% year-to-date. The figure is actually big for a large-cap pharmaceutical company. For perspective, Merck moved barely 1% while other large pharmaceutical stocks, such as Johnson & Johnson, Roche, and Bristol Myers Squibb, have moved around 12% each. But will PFE stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent?

According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for PFE stock average around 3% in the next one-month (twenty-one trading days) period after experiencing a 4% drop over the previous week (five trading days).

Furthermore, Pfizer’s Covid-19 vaccine has received full U.S. FDA approval earlier this week. While the shot is being distributed on an emergency use basis currently, a full authorization may encourage more people who were previously on the fence about getting vaccinated to finally take the shot. Moreover, having a fully approved vaccine could possibly enable businesses to require mandatory vaccinations. This could lead to incrementally higher demand for Pfizer’s vaccine. Our Pfizer vaccine updates have more details. We believe that PFE stock will likely rebound after its recent fall and continue to make fresh highs in the near term.

But how would the returns fare if you are interested in holding Pfizer stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Pfizer stock chance of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

IF PFE stock moved by -5% over five trading days, THEN over the next twenty-one trading days PFE stock moves an average of 3%, with a 62% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of Pfizer Stock Movements:

Question 1: Is the average return for Pfizer stock higher after a drop?

Answer: Consider two situations,

Case 1: Pfizer stock drops by -5% or more in a week

Case 2: Pfizer stock rises by 5% or more in a week

Is the average return for Pfizer stock higher over the subsequent month after Case 1 or Case 2?

PFE stock fares better after Case 1, with an average return of 2.7% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.5% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Pfizer stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Pfizer stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For PFE stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Pfizer after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Pfizer stock by changing the inputs in the charts above.

 

[Updated: 8/3/2021] PFE Stock Update

The stock price of Pfizer (NYSE: PFE) has seen an 11% rise over the last twenty-one trading days, and most of the gains have come over the last ten trading days, after the company reported strong Q2 results, and revised its full-year outlook upward. Note that such a move for PFE stock is uncommon, and it has occurred less than 60 times over the last 10 years. Pfizer continues to see strong sales from its Covid-19 vaccine, which remains the key growth driver. The vaccine garnered $7.8 billion in sales during Q2 2021, and it will likely add another $24 billion to the company’s top-line over the next two quarters, in our view.

However, now that PFE stock has seen a rise of 11% in twenty-one trading days, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is almost an equal chance of a rise or a fall in PFE stock over the next month. Out of 58 instances in the last ten years that PFE stock saw a twenty-one day rise of 11% or more, 30 of them resulted in PFE stock rising over the subsequent one month period (twenty-one trading days). This historical pattern reflects 30 out of 58, or about 52% chance of a rise in PFE stock over the coming month. See our analysis on Pfizer Stock Chance of A Rise for more details. While the 52% chance means the stock could go in either direction, Trefis estimates Pfizer’s Valuation to be around $50 per share, which is nearly 14% above the current market price of around $44, implying that there is more room for growth in PFE stock.

Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using last ten years data

  • After moving 5.1% or more over a five-day period, the stock rose in the next five days only on 49% of the occasions.
  • After moving 9.5% or more over a ten-day period, the stock rose in the next ten days on 57% of the occasions
  • After moving 11.0% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 52% of the occasions.

Predict average return on Pfizer (PFE) Stock Return: AI Predicts PFE Average and Excess Return After a Fall or Rise

Pfizer (PFE) Stock Return (Recent) Comparison With Peers

  • Five-Day Return: PFE highest at 5.1%; MRK lowest at -1.4%
  • Ten-Day Return: PFE highest at 9.5%; MRK lowest at -1.1%
  • Twenty-One Days Return: PFE highest at 11%; MRK lowest at -2.3%

 

[Updated: 7/28/2021] Pfizer Earnings Update

Pfizer (NYSE: PFE) today reported its Q2 results, which were below our expectations but beat the consensus estimates. The company reported revenues of $19.0 billion, lower than our forecast of $21.7 billion, and above the $18.5 billion consensus estimate. Our forecast was driven by higher contribution of Pfizer’s Covid-19 vaccine, which came in at $7.8 billion. Looking at the bottom line, the company reported adjusted EPS of $1.07, compared to $1.12 per Trefis and $0.96 per the consensus estimate.

We have forecast the Covid-19 vaccine sales to be nearly $35 billion in 2021, compared to $26 billion per Pfizer’s earlier guidance. However, the company has now revised this guidance upward to $33.5 billion. So far, the company has recorded sales of $11.3 billion from its Covid-19 vaccine, implying another $22.2 billion expected over the next two quarters. Overall, it appears that the Covid-19 vaccine continues to drive the company’s top and bottom line expansion for now, but leaving that aside, revenue grew 10%, led by strong growth in biosimilars and alliance revenues. We will update our model to reflect the recently announced numbers. The street is likely to take these numbers on a positive note, given that Pfizer has also revised its full-year earnings outlook upward. Trefis estimates Pfizer’s Valuation to be around $50 per share, which is nearly 20% above the current market price of around $42.

 

[Updated: 7/26/2021] Pfizer Q2 Earnings Preview

Pfizer (NYSE: PFE) is scheduled to report its Q2 2021 results on Wednesday, July 28. We expect the company to likely post revenue and earnings well above the consensus estimates, primarily led by its Covid-19 vaccine. Pfizer should see an overall pickup in pharmaceutical demand due to an increase in hospital visits with economies opening up gradually. We expect the company to navigate well based on these trends over the latest quarter.

Furthermore, we also think PFE stock remains attractive at the current valuation. Trefis’ forecast indicates that Pfizer’s valuation is $50 per share, which is 19% above the current market price of $42. Our interactive dashboard analysis of Pfizer’s Pre-Earnings has additional details.

(1) Revenues expected to be above the consensus estimates

Trefis estimates Pfizer’s Q2 2021 revenues to be around $21.7 billion, 17% above the $18.5 billion consensus estimate. Now that the economies are opening up with vaccination programs underway in multiple countries, pharmaceutical companies will likely benefit from an increase in the volume of new patient starts. For Pfizer, its Covid-19 vaccine remains the key growth driver in the near term, with 2021 annual sales projected to be as high as $35 billion, per Trefis estimates. Pfizer’s Q1 2021 sales were up 42% y-o-y to $14.6 billion, primarily driven by $3.5 billion sales from its Covid-19 vaccine, and the contribution of this vaccine is expected to be much higher in Q2. Our dashboard on Pfizer Revenues offers more details on the company’s segments.

2) EPS likely to be also above the consensus estimates

Pfizer’s Q2 2021 adjusted earnings per share (EPS) is expected to be $1.12 per Trefis analysis, 17% above the consensus estimate of $0.96. Pfizer’s adjusted net income of $5.3 billion in Q1 2021 reflected a 48% rise from its $3.5 billion figure in the prior-year quarter, due to higher revenues as well as margin expansion. For the full year 2021, we expect the adjusted EPS to be higher at $4.75 compared to $2.22 in 2020.

(3) Stock price estimate 19% above the current market price

Going by our Pfizer’s Valuation, with an EPS estimate of $4.75 and a P/E multiple of 10x in 2021, this translates into a price of $50, over 19% higher than the current market price of $42. While the 10x figure is lower than the levels of over 14x seen in 2018 and 16x as recently as late 2020, this can be attributed to the fact that Pfizer’s EPS will be very high in 2021, followed by a decline from 2022 onward, with a slowdown in Covid-19 vaccine sales. Look at our Pfizer Covid-19 Vaccine Updates for more details.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year.

While PFE stock looks attractive at its current levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Mettler vs Abbott.

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Notes:
  1. FDA staff say Pfizer COVID-19 boosters may not be needed, but do improve immunity, Michael Erman, Sep 15, 2021, Reuters []
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